Expert: Car sales tax hike likely to affect imports

Monday saw car-owners paying different levies based on the size of their vehicles. It's a move China is taking to save energy and cut pollution. There has already been some response from sellers. But experts say they do not expect the policy to have much impact on production structures in the domestic sector.

The adjustment in the consumption tax has made a big difference in the race between big and small cars. Starting September 1st, larger cars could face taxes of as high as 40 percent. In contrast, the consumption tax for small cars, with engines of 1 liter or smaller, stands at just 1 percent.

Experts say the adjustment will have a limited impact on home-made autos, as big cars account for less than 1 percent of what is manufactured locally. But they think that imported cars may see some impact on sales. Customs figures show over 210,000 cars entering the country in the first half of this year. Of these, 43 percent were cars with large emission-volumes.

Xu Changming, Director of China Information Center said "The new policy will greatly affect the sales volume of imported cars, as many of them have engines above 3 or 4 liters. And these cars are seeing big raises in consumption tax."

Insiders say the rising consumption tax will increase costs of imported autos with engines between 3 to 4 liters by 13 percent. For those above 4 liters, import costs could go up by as much as 33 percent.

In response, car-sellers say prices have already risen for cars with high volumes of polluting emissions. A car from the high-end brand Lexus, has seen markups hitting as high as 200 thousand yuan.

One seller of Lexus said "The GS-430 model has increased from 828,000 to 944,000 yuan, while the price of the ES-350 has jumped by 120,000 yuan."

In addition, major foreign car-makers such as BMW, Benz and Audi say they have decided to hike prices of autos with large emissions. But insiders say some manufacturers may choose to absorb additional costs to keep up sales volumes.

Experts say it's not enough to rely solely on the adjustment of consumption tax to curb production and purchase of big cars. And they expect more policies to be launched in the future.

Xu Changming said "The current vehicle purchase surtax could also be levied in a way similar to the consumption tax. To charge it based on vehicle sizes will have a significant impact on structural adjustment in the auto sector."

Experts say the government will continue to use macro-control measures to improve car-purchase patterns and realize its energy-saving and environmental-protection targets.